By Robert S. DiMarco
The availability of insurance to protect collegiate athletes’ future professional earnings is critical in enabling many students to continue their collegiate careers. Insurance protecting against permanent disability (catastrophic/disability coverage) and loss of earnings resulting from injury or illness (loss-of-value (LOV) coverage) is available to student-athletes projected to be picked in the first three rounds of the NFL and NHL drafts, as well as those slated as first-round picks in the NBA, WNBA, and MLB drafts. Many universities have acted to assist eligible student athletes to take advantage of the coverage. For university compliance personnel, evaluating insurance for athletes in multiple sports has become a year-long endeavor and a regular part of their job duties. Although disability and loss-of-value insurance is relatively new, and very few claims history exists under these policies, certain practices in assisting collegiate athletes with disability/LOV insurance have emerged.
Insure All Competitions. One fundamental goal in buying disability/LOV insurance is to secure coverage for all games during the athlete’s final year of competition. Although coverage should apply to injury or illness that occurs off the field, on-field activities are most likely to trigger a claim. It is critical, therefore, that the policy term encompasses all scheduled competitions and potential post-season competitions. Ideally, for sports that have competitive practices before the first game (such as spring practice for football), coverage would apply to these events as well.
Start the Process Early. In order to secure coverage for the beginning of the athlete’s season, a determination of eligibility should be obtained as soon as possible. The NCAA will evaluate an athlete’s eligibility for its Exceptional Student-Athlete Disability Insurance program at any time. Once it is determined the athlete is eligible for the coverage projected to be a high draft pick, coverage proposals can be requested, insurance applications can be submitted, and health information can be provided to the insurer to expedite its issuance of the policy.
Avoid Denials for Early Injuries. In practice, many applications for coverage are submitted just before the beginning of competition. Insurers often accommodate this time table by providing a “confirmation of coverage” that states coverage will apply as of that date so long as certain conditions are met. Among those conditions, the student-athlete’s physical condition does not change before the date the policy is signed and issued by the insurer, which can take months. Consequently, insurers may deny coverage related to injuries that occur within the first few months of the policy. Obtaining the policy as soon as possible can help avoid this pitfall. Student-athletes should avoid — or seek to eliminate — provisions in the application or policy excluding coverage for an injury or illness that occurs during the policy period but prior to the date the policy is “issued” or “incepted.”
Error on the Side of Full Disclosure. The student-athlete should carefully read the application for insurance and be sure to truthfully, and thoroughly, respond to the insurer’s questions. Insurers increasingly deny coverage by arguing that the policy is rescinded because of a misrepresentation by the policyholder in the application, even if the misrepresentation was unrelated to the policyholder’s claim. Such arguments provided the basis for the coverage denials of the claims of former University of Southern California football players Marqise Lee and Morgan Breslin. To avoid this outcome, athletes should always error on the side of disclosure.
Scrutinize Scouting Service. Insurers determine the amount of coverage available to athletes based on their sport, the player’s injury history, and their projected draft position. In deciding which policy to buy, athletes should ask insurers which scouting service they use to determine their projected draft position. An insurer’s failure to use a reputable service could significantly diminish the coverage available to the athlete.
Compare Policy Terms. Unlike many types of insurance purchased by businesses, insurers have not adopted a common “form” for disability/LOV policies. The result: policy language can vary widely from insurer to insurer. Some policies are better written and clearer on their face. Others include unique coverage conditions and exclusions. Before obtaining a “confirmation” or “binder” of coverage from an insurer, student-athletes should request a specimen copy of the standard terms, conditions, and exclusions included in insurers’ disability/LOV policies and evaluate the pros and cons of each insurer’s form.
Negotiate Removal of Unfavorable Provisions. Because of competition among insurers to win business, policyholders have leverage to negotiate the terms of coverage. The NCAA, for example, recommends that student-athletes seek to eliminate exclusions that bar coverage for injury or illness related to any part of the body in which the athlete has received medical treatment, or for “cumulative injury” or claims related to a “degenerative process.” Student-athletes should be wary of exclusions for disability caused by conditions of psychotic, psychoneurotic or epileptic origin and conditions requiring forfeiture of coverage if the athlete “misstates” any information provided to the insurer. All of these provisions are unreasonably broad.
Mitigate Damages. The policies contain provisions requiring the student-athlete do “all things necessary” to avoid or to diminish an injury or illness. Such provisions should be interpreted to only require reasonable efforts by the student-athlete in light of the information known to them at the time. Nevertheless, the student-athlete should take care to mitigate the effects of an injury or illness. That includes seeking appropriate care when symptoms arise, reporting any problems to appropriate personnel, and obtaining all records of such instances.
Consider Financial Consequences. Student-athletes should be advised of the potential financial consequences of obtaining disability/LOV insurance. For example, if the policy is purchased with NCAA Student Assistance Funds, the payment might be treated as taxable income. Moreover, depending on the terms of the student-athlete’s financial aid, the use of these funds on a student-athlete’s behalf could affect their eligibility for continued aid.
Obtain Professional Advice. In assisting student-athletes with procuring disability/LOV coverage, universities should consider working with an insurance broker or insurance coverage counsel with expertise in evaluating such coverage and negotiating favorable terms and provisions with providers. Universities should not confuse the advice of an independent broker with that of a producing agent working for an insurer. Although such agents sometimes represent themselves as independent brokers, they often represent the interests of a specific insurer and are not looking out for the best interests of the university or its student-athletes when it sends the university proposed coverage terms from an insurer.
DiMarco is a J.D. Candidate, Class of 2017, at the Levin College of Law at the University of Florida. www.linkedin.com/in/robertsdimarco
